Saturday, September 17, 2005

The Ministry of Labour and Social Affairs carried out a study surveying prices of basic food items from 2001 to 2005. Rashid Al Falasi, head of the Statistics Section at the ministry, told reporters at a press conference that price rises were much steeper than the team undertaking the study expected.. . .Al Falasi said he expected prices to rise briefly after November 1, when social security recipients relieved their increased payments. President His Highness Shaikh Khalifa Bin Zayed Al Nahyan ordered a 75 per cent increase in the monthly payments on Monday. “I expect traders will do what they did when government salaries were increased. They spiked prices and then reduced them again when they realised they were losing customers.”

The large increase in government salaries increased demand for many products, but most of these products are imported goods with world markets. The UAE is small relative to the size of these markets. Economic theory predicts that for these goods any increase in price would be temporary, lasting as long as it takes to increase the flow of imports.

But since we have all these "sole-source" import rules here, making every importer a de fato monopolist, I wouldn't expect competition to drive prices down anytime soon.

The best thing the government in this country could do is get rid of those importing rules, but then they fear the bad old carpetbagger days of the 70's. Someone needs to impress upon the Emiratis that they're no longer rubes waiting to be taken to the cleaners by those slick western sharks.